Gov. Rick Scott wants the federal government to import Floridas fiscal restraint to Washington, D.C.
He said Tuesday that Floridas budget measures -- closing a $3.8 billion shortfall, increasing reserves -- led credit rating agencies S&P and Moody's Invester Service to move the states outlook from negative to stable, and Washington should take notice.
What we did in our state, and you can see the positive impact its having, when I came in ... were not doing new debt. Ive done all these Cabinet meetings that yall come to, Ive talked about debt in every Cabinet meeting as much as I could. And you can see what the credit agencies did for us. I think they were all on credit watch for potential downgrade and they took that off because were not borrowing more money, Scott said.
President Barack Obama signed the deal Tuesday to raise the debt ceiling and cut $2.4 trillion over the next 10 years. Had the debt ceiling not been reached, Obama and Treasury Secretary Timothy Geithner would have had to decide first how it would satisfy the debts the nation has already incurred -- then, which of Congresss appropriations for this year would go unfunded.
State officials said the impact on Floridas financial outlook would not have been immediate, but if the debt ceiling had not been raised, resulting in a downgrade of the federal governments credit rating, the long-term consequences for the state would have been dire.
I have to believe, from my common-sense approach, instead of theory, that (a federal credit downgrade) would drive rates up and have a negative effect on our economy, Division of Bond Finance Director Ben Watkins said during Tuesdays Cabinet meeting.
Chief Financial Officer Jeff Atwater presides over the State Board of Administration, which handles the investments for the states pension fund. He said a breach in the debt ceiling would not have forced him to change his investment strategy.
Thats a very good question. The answer to that would probably not have been changing our immediate investment strategy, because again, most of those are in very secure investments, and this would have been a time where, if they had not reached a deal, you would have seen tremendous market volatility and that would have been the wrong decision to move out of some of the most secure investments we have, Atwater said.
During the previous fiscal year, which ended June 30, the SBA pension fund increased by $19 billion.
The outlook for state finances might be strong, but local governments throughout Florida stood to take a hit if the federal debt ceiling wasnt raised. Because municipal bonds are more closely tied to U.S. treasuries, Watkins said, some local governments credit ratings could have been downgraded along with the federal governments rating.
The debt deal alleviated the municipal bond downgrade threat, but couldnt prevent the Santa Rosa Bay Bridge Authority from defaulting on a payment in July. Watkins said the default could impact other expressway authorities in Orlando and Tampa.
I went on to say that it may well impact the expressway authorities and their ability to access credit, and their borrowing costs and all of that because of the stigma associated with a default on an expressway authority deal that the state is supporting, Watkins said.
In his report on the credit rating outlook, Watkins said Scott and the Legislatures balanced budget helped to soothe market concerns, but a thriving economy is needed to put the state on a more secure financial footing.
The new question going forward is how the economy in the state performs going forward, given the housing markets and other drags on the state economy," he said.
Reach Gray Rohrer at grohrer@sunshinestatenews.com or at (850) 727-0859.
